Futures tick higher despite government shutdown

U.S. stock index futures ticked higher on Tuesday, as markets appeared to shrug off the U.S. government shutdown, with demand for riskier assets like equities little changed.

"This morning, the risk tone improves somewhat, as investors take the view that a partial shutdown, if resolved quickly, will do little damage to the overall health of the U.S. economy," said Joe Rundle, head of trading at ETX Capital. "That does however mean that we will need to hear the right sounds out of Washington to feel confident enough that the shutdown will not damage economic growth."

The White House ordered federal departments to execute shutdown plans after Democrats and Republicans failed to agree on a spending bill before Monday's midnight deadline, leaving nearly 800,000 people out of work. The Democratic-led Senate twice rejected the Republican-led House of Representatives' demands to delay portions of the Obamacare health insurance bill. Now, the two parties must strike a deal on raising the federal borrowing limit to avoid a debt default by October 17.

This is the first partial federal shutdown since 1996, and it is uncertain for how long it might last.

The flow of economic data will be disrupted as a result of the shutdown. Construction spending for August, which had been scheduled for 10 am ET, has been delayed. But the ISM (Institute of Supply Management) manufacturing index, which tracks monthly changes in production, is still expected to be released at 10 am ET and is seen pointing to continued solid expansion in September.

Daiwa Capital Markets' Grant Lewis said the negative impact on growth would be directly proportional to the length of the shutdown.

"With the deadline to extend the debt ceiling (17 October) also rapidly approaching, the longer there is no agreement on getting the government back up and running, the greater concerns will be over getting agreement on the debt ceiling, further fueling economic uncertainty," he said in a morning research note.

Among earnings, Walgreen posted earnings that edged past expectations and announced a 4.6-percent increase in same-store sales. Still, shares slipped.

Merck rallied after the pharmaceutical giant announced plans to slash an additional 8,500 jobs on top of previously announced cuts, adding that it planned to cut operating expenses by $2.5 billion by the end of 2015.

Stocks in Asia and Europe mostly moved higher in early trade on Tuesday, with Italian stocks paring losses from the previous session's heavy selling. The country's benchmark FTSE MIB recovered somewhat on reports that Silvio Berlusconi's center-right party could rebel if he continues to threaten to bring down the government.